System and method for creating and managing a synthetic currency

ABSTRACT

A synthetic currency transaction network which performs transactions with near real time finality of transaction between potential borrowers and potential lenders. Synthetic currency is created by pooling and dividing into shares a portfolio of highly liquid assets and frequent evaluation and disbursements of dividends on those assets so as to hold the value of the synthetic currency share at unity with the underlying currency. The synthetic currency network provides for interfacing users to the synthetic currency transaction network. A database is used for storing and maintaining records and other information of the network. A transaction manager manages network users&#39; accounts and all network transactions. A fund accountant manages network information regarding the synthetic currency. A deposit bank acts as custodian for the portfolio of highly liquid assets which underlie the synthetic currency. An investment manager manages the measure of synthetic currency and directs investment decisions. A loan accountant manages all lending and borrowing activities in the synthetic currency transaction network.

CROSS REFERENCE TO RELATED APPLICATIONS

This invention claims the benefit of U.S. Provisional Application No.60/015,542, filed Apr. 12,1996.

BACKGROUND OF THE INVENTION

This invention relates to a transaction network for a synthetic currency(commercially designated as Inside Money). More specifically, thisinvention relates to alternatives to cash transactions which allow usersof the transaction network to conduct electronic currency transactionsin a 24-hour international network creating a virtual central bank withnear real-time finality of transaction. Synthetic currency is created bypooling and dividing into shares a portfolio of highly liquid assets andby frequent evaluation and disbursement of dividends on those assets soas to hold the value of the synthetic currency share at unity with theunderlying currency.

Current methods of cash transactions involve the transfer of cash byusing notes or draft instruments. A holder of an instrument must presentthis instrument to another or a financial institution for payment. Thebank, in the case of a check, will verify sufficient funds and then paycash to the holder and debit the drawee's account accordingly.Electronic debiting and credit means exist. However, such systems do notprovide finality for their transaction or accrue interest. Currently,electronic transfer means have no finality for interest based assets.For example, if there are insufficient funds in the drawee's account,the holder will then have to go back to the drawee to demand payment ofthe check before he can receive cash. Thus, in current transactions,finality of transaction does not exist at the time of transfer of theinstrument or token of value. Similarly in stock or mutual fundtransfers, current transaction networks include transaction delaysbecause transactions must pass through multiple banking systems beforepayment finality is achieved. Such delays also prevent cash or currencyassets from earning interest for the holder while the cash or currencyis transferred to the proper account. There is no current cash orcurrency exchange network that continuously pays the holder of cash orcurrency assets a market interest rate.

Currently, potential lenders and potential borrowers of currency must gothrough intermediaries to identify each other. Once this occurs, the twoparties are able to then conduct a transaction between themselves.However, current systems have no means of allowing potential lenders andpotential borrowers to obtain real-time transaction based informationregarding credit ratings of the other party prior to the transaction.

In current systems, since cash or currency is liquidated during atransaction, current cash or currency assets cannot continuously payinterest throughout the entire transaction.

SUMMARY OF THE INVENTION

The Inside Money (IM) network is a managed network for syntheticcurrency trading and lending. Two major advantages of the syntheticcurrency network are near real-time finality of settlement andcontinuous interest on the instrument of trade. The IM network includesthe following major components, a transfer agent, fund accountant,investment advisor, custodian, shareholder service agent, database, andloan accountant.

The complete IM system permits users to buy and sell mutual fund shares,or notes from a pool of such shares. This saves the users thetransaction cost associated with the direct issuance and transfer ofmutual fund shares. IM conducts a net transaction with the mutual fundto reconcile the pool with the share demand. These shares are alsoavailable for lending. These in combination allows the IM network to paya higher return on the mutual fund share than the mutual fund alone.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a diagram of the Inside Money synthetic currency networkshowing user workstations, shareholder service agent, fund accountant,investment advisor, transfer agent, loan accountant, and deposit bank.FIG. 2 is a diagram of the interconnections between network components.FIG. 3 is a diagram of an expanded Inside Money network. FIG. 4 showsthe components of a share transfer.

DESCRIPTION OF THE PREFERRED EMBODIMENT

Inside Money (IM) is a synthetic currency transaction network thatincludes multiple mutual funds, a means for connecting potentialborrowers to potential lenders of IM shares, and methods and techniquesfor conducting private IM share transactions in either an on-line oroff-line environment or a hybrid thereof. The IM system allows users toconduct transactions in a 24 hour international network with nearreal-time finality of transaction. Moreover, IM participants may lendand borrow IM shares from each other based on a borrower's loan ratingand a participant lender's decision. Furthermore, IM participants canbuy IM shares on margin based on collateral. This collateral can betracked in an off-line or on-line environment. IM shares act as tradablesynthetic currencies. The Inside Money network thus results in a global“super” virtual central bank.

The IM synthetic currency is created by pooling and dividing into sharesa portfolio of highly liquid assets and by frequent evaluation anddisbursements of dividends on those assets so as to hold the value ofthe IM share at unity with the underlying currency (e.g., one IMshare=one dollar). In an extended scenario, by mutual agreement from allparticipants, these participation units can also be allowed to rise andfall in value as with any other currency. A computer system calculatesand executes the transactions necessary to maintain the IM share cost atunity and calculates and executes the transactions necessary to keep theportfolio sufficiently liquid while maintaining a high rate of return.Synthetic currency transactions are transactions within a speciallycreated system structure which allows participants to conduct fundtransfers with the finality of cash settlement.

IM synthetic currency transactions have several advantages overtraditional cash transactions. First, IM synthetic currency continuouslypays the holder a competitive interest rate. Thus, IM is a new form of“cash” that has the finality of transaction available with cash and aninterest earning feature available with an asset. Second, the IM networkreduces transaction delays by bypassing multiple banking systems. Thus,IM earns interest for the holder while the IM cash is transferred.Third, since IM is not liquidated during a transaction, IM cancontinuously pay interest throughout the entire transaction.

The IM transaction network provides a lending and borrowing sub-systemthat arranges credit for IM users and provides an opportunity for higherreturns for the IM lender. An IM lender may loan IM while retaining theinterest earning future of IM, to a borrower and require the borrower topay additional interest such as IM+some %. All lines of credit are fullycollateralized. The use of fully backed loans keeps the IM systemliquid, stable and all transactions final. Moreover, it provides apooled matching service between IM lenders and qualified IM borrowers.

The pooling matching service may also disclose the rating of a potentiallender and a potential borrower. For example, a potential borrowers'rating may be AA or AAA or the like. This rating may be disclosed to apotential IM lender and the IM lender can then approve or disprove aloan to the borrower based on the rating service and other factors. Whena loan is made an IM lender can choose to retain the interest bearingfeatures of IM and negotiate an interest payment from the borrower. Forexample, company A could loan IM shares to Company B, for Company B topay IM to Company C; Company A and B may negotiate a rate of return, forexample, IM plus some additional % which would be the IM return plussome additional percent of the value of IM that Company B must pay toCompany A for borrowing the IM. The system of the present inventionprovides a means to track who holds IM, who receives the interest due onthe IM and which participants owe points to the other participants.

A combination of sliding loan rates and transaction fees provide userswith incentive to execute IM transactions as soon as possible. Thiscreates a transaction environment with a more evenly distributedtransaction arrival rate over the business day.

The IM transaction agent system in conjunction with the IM syntheticcurrency act like a “super” virtual central bank to allow users aroundthe world to make near real-time final transactions.

All components of the IM system unless otherwise noted are computercontrolled and managed processors with specific functionality. Functionsmay include a transfer agent function, a fund accountant function, aninvestment advisor function, a shareholder service agent function, and adatabase or record management server function. It is understood that thedescribed functionality may be implemented on a single computerprogrammed to implement the described functionality, or in multiplecomputers deployed in a network.

The IM system includes user workstations, computer processors, accountdatabase(s), and communication links to the external financial computerinfrastructure.

The complete IM network allows users to trade in pools of mutual fundshares. The IM network saves a participant money because the networkconverts the transactions from a gross settlement system (alltransactions done directly with the mutual fund thereby incurring themaximum mutual fund transaction fee) to a periodic net settlement system(the network conducts a few net transactions with the mutual fund). Thenetwork maintains this ability by establishing (through the analysis ofpast transaction flow) a high and low margin of shares necessary toabsorb the internal dynamics of gross settlement trading within anexternal net settlement trading system. The necessary margin pool iscollateralized by users collectively designating a certain percentage ofshares to cover outstanding transactions. For example, a 5 percentcollective designation may establish a sufficient margin so that thetrading pool need reconcile a low or high share balance (e.g. exceedingthe pool margins) with the underlying mutual fund only 1 in every 10transactions.

The Transaction Agent

As shown in figures one and two, the Transaction agent has five primaryfunctions (1) a Transfer agent, 18 (2) a Fund Accountant, 17 (3) aInvestment Advisor; 19 (4) a Shareholder Service Agent 16, and (5) adatabase 20 or record management server.

The Transfer agent (TA) 18 performs book-entry (i.e. changes toaccounts) to user accounts. The TA 18 checks, approves, and makes finalall network transactions. The parameters checked before a transaction isapproved include the number of IM shares in the pool, lines of credit,whether a share is marked as “loanable” , and whether a transaction ismarked as contingent on another transaction.

The TA 18 under the expanded system conducts all the above and is ableto perform transactions on and with pools of mutual fund shares.

The Fund Accountant (FA) 17 calculates IM's rate of return and advisesthe TA to take the actions necessary to hold the value of the IM shareat unity 23 with the underlying currency. IM share holders can choosewhether IM dividends should purchase more IM shares or be deposited intocash accounts.

The FA 17 also updates exchange rates for transfers between differentsynthetic currencies such as a transfer between IM (dollars) and IM(Yen).

Under the expanded system the FA updates the price of mutual fund sharesand calculates exchange rates for transfers between the funds.

The Investment Advisor (IA) 19 upon a request to create or liquidate IMfrom the TA 18, directs as to what particular (short, medium, or longterm) investments should be purchased or sold to maintain IM's high rateof return and high liquidity. This is similar to a treasury function.The IA 19 also re-invests mature investments into other investments tomaintain the IM investment mix. The IA 19 processes advanced notice onlarge IM buy or sell orders by acting as necessary to minimize the costof IM creation or liquidation.

Under the expanded system the IA 19 could offer advice as to whataverage return rate mutual funds or other financial instrument(s)provide. The IA 19 could establish a unit of participation that isderived from a combination of different mutual funds, securities, notes,letters of credit, trade invoices, and other electronic commerce. Inthat case the IA 19 would function like the IM IA 19 by keeping the pool(the derivative mutual fund) strategically invested in the underlyingmutual funds and other financial instruments.

Rather than to manage to a unit value by mutual agreement from all theparticipants, the participant units can also be allowed to rise and fallin value as with any other currency.

The Shareholder Service Agent (SSA) 16 provides the interface betweenthe network user and the system. It processes customer inquires as tothe state of a transaction, account balances, and passes other commandsthrough to the appropriate functional element. The SSA 16 also providesthe hard-copy record of transaction to the user as required bysecurities regulation.

A database 20 is maintained by the system. The database records includeaccount balances, collateralized lines of credit, transaction records,rates of returns, exchange rates, pricing information, audit trials,“loanable” IM, amounts owned/loaned, and collateral valuation.

The Loan Accountant

The Loan Accountant (LA) 12 establishes credit lines for IM users. Allcredit lines are fully collateralized. The LA 12 verifies a first lienon the collateral 15 and assess daily the value of the collateral 15.The LA can require additional deposits or margin to compensate forcollateral 15 short falls.

The LA calculates the rate of return for the pool of IM “loanable”shares and distributes the interest acquired from the loaned IM to theloan pool. A number of loan return and priority schemes are available.One possible scheme is to evenly prioritized and evenly distribute theproceeds to the loan pool. The LA 12 requests the FA distribute theinterest proceeds.

The LA 12 is responsible for the collection of all debts and feesassociated with the system's lending and borrowing function.

In the expanded IM system the LA's 12 functionality (collateral 12evaluation and pooled loan return) could be more closely linked to themultiple funds traded on the network, e.g. a mutual fund share in thesystem could be easily evaluated and secured as collateral for the IMcredit line.

Some or all of the LA 12 system or functionality can also be containedwithin the transaction agent 11.

The Deposit Bank

The Deposit Bank (DB) 13 acts as account custodian for the assets 14underlying IM. It also conducts banking functions for the transactionagent.

Referring now to Figure three, under the expanded system the several DBs13 act as the custodians of other assets/mutual funds 14. Theseassets/mutual funds 14, while traded on the IM system, are governed bythere own IA's 19, investment criteria, and transaction fees. The IMtrading system provides a higher return on these funds becausetransactions conducted within the IM network margins are conductedsolely within the IM system thereby avoiding the transactions feesassociated with buying and selling the mutual fund directly. Thus, IMconducts net transactions with the assets/mutual fund 14 and passes thesavings (i.e. the costs that would have incurred from gross transactionswith the mutual fund) to the IM user.

Operations

The Transaction agent may conduct three sets of transactions (1) clienttransactions, (2) fund management transactions, and (3) mutual fundtransactions.

Client Transactions

The client transaction set includes: (1) buy IM shares, (2) sell IMshares, (3) transfer IM, and (4) exchange IM. As stated above, the loansrates and transactions costs are calculated with a sliding rate. Thesliding rate encourages users to execute a transaction as soon aspossible.

The transfer of money into the IM network uses the following steps. Cashis transferred from a Central Bank System (e.g. the Fed Wire) to atransaction agent account. If sufficient IM shares are available in themargin pool, then the TA 18 transfers the cash into IM shares. Ifsufficient IM shares are not available in the pool, then the TA 19transfers the cash to the IA 19 and requests an increase in the size ofthe IM pool. (The IM share is always held at unity with the underlyingcurrency). The IA 19 makes a decision as to what assets are required bythe IM pool (e.g. short, medium, or long term) and executes buy or sellorder(s) to the custodian 22. The custodian 22 debits the cash accountaccordingly. When the custodian 22 receives confirmation that the assetsare under transaction agent control, the custodian 22 advises the FA onthe new holdings and rate of return. The FA 17 calculates the new sizeand dividend on the IM pool and advises the TA 18 of the new IM poolsize. The TA 18 now transfers the shares to the buyer's IM account.

The transfer of money from the IM network to an external cash accountuses the following steps. The IM user enters the irrevocable paymentinstruction. The TA 18 checks the users IM account for sufficientshares. If insufficient shares are present the request enters a pendingqueue to await either (1) the receipt of sufficient shares or (2) if theautomatic borrowing credits are available and if the instructioncontains a request for the credit, then the transaction is cleared forfinality and the users IM credit account is debited accordingly. Whensufficient IM shares are received, the transaction is cleared forfinality and the user IM account is debited accordingly. If the IM poolis below its high margin mark or the IM shares are returned to the pool.If the IM pool is above its high margin the IA 19 is advised toliquidate the appropriate amount of IM from the pool. The IA 19 makes adecision as to what assets 14 are required by the IM pool (e.g., short,medium, or long term) and executes buy or sell order(s) to the custodian22. Upon confirmation of the asset 14 sale, the custodian 22 credits thecash account accordingly. When the custodian 22 receives confirmationthat the assets 14 are redeemed. The custodian 22 advises the FA 17 onthe liquidated holdings. The FA 17 calculates the new size and dividendon the IM pool and advises the TA 18 of the new IM pool size. The TA 18now electronically transfers the cash to the user's designated externalaccount.

The IM transfer feature allows users to transfer (with finality ofsettlement) IM shares between each others accounts.

The IM Exchange feature allows a user to exchange between differenttypes of IM at prevailing currency exchange rates. For example, a usercould exchange his IM(Dollars) to IM(Yen) at the current currencyexchange rate.

Management Transactions

The management transaction set includes transactions necessary toprovide gross supply and demand requirements for IM shares and cash payout. The IM network has substantial margins in all accounts, however, alarge movement of supply and demand for IM shares must be satisfied bythe creation or liquidation of IM shares. Accordingly, the system canautomatically order the creation or liquidation of IM shares. Thenetwork has structural incentives (e.g. sliding loan rates andtransaction fees) for users to advise the network in anticipation oflarge IM buy or sell orders. This allows the network to optimize theinternal IM supply and demand with large changes in the total IM pool.Furthermore, it allows the network to create or liquidate IM in the mostcost efficient manner.

The FA 17 continuously monitors and calculates the dividends required tohold IM at unity with its underlying currency. Moreover, the FA 17 willpay dividends in either cash (in which case the TA 18 must be invoked totransfer the money to a cash account) or IM shares (in which case thelow margin mark for the IM pool must be checked and IM created asnecessary).

Mutual Fund Transactions

The expanded IM network allows users to trade mutual fund shares from apool of such shares. So long as the quantity of shares does not exceedthe margin of the pool, the transaction is contained within the IMnetwork. The IM network performs net adjustment to the mutual fund poolsize only when necessary. The custodian 22 and FA 17 update the price ofthe mutual fund shares. For example, an expanded network might havethree pools an IM synthetic currency pool, a Magellan mutual fund sharepool, and a Kempfer mutual fund share pool. Network users can buy andsell into the mutual fund pools using the IM currency.

A Buy and Sell Bulletin Board System

The IM network provide an electronic bulletin board system (eg. viaintra or internet access) wherein those participants who wish to loan IMshares may note their availability and those participants that wish toborrow IM shares may note the desire to buy IM shares creating a marketor exchange. The bulletin board may disclose the rating of theprospective borrower company again, either AA, or AAA or junk. Theprospective lender then may on a case-by-case basis approve ordisapprove of who it lends its IM shares. The transaction agent systemprovides a means for transferring the IM shares to allow a prospectiveborrower to receive the shares by book entry and transfer the shares bybook entry to a third party.

The Virtual Transaction Agent

A second embodiment of the present invention includes a virtualtransaction agent wherein sufficient authentication and encryptiontechniques are used to encode IM shares, notes, letters of credit, tradeinvoices, or other electronic commerce onto electronic currency mediumsuch as the e-cash medium or electronic smart cards or that disclosed inU.S. Pat. No. 5,455,407 to Rosen. A present limitation to the acceptanceof smart card technology is the lack of interest earned on the storedvalue.

IM implementation on the e-cash medium may require, within the encryptednotation of the IM shares, a record of share transactions betweenindividuals on their e-cards, a notation that the interest-bearingfeature of IM was left on or “stripped” off, and a notation of lendingpoints. The transactions of IM are recorded on the electronicrepresentation of the IM share so that when the IM share is cashed outof the IM system, the IM shareholders may be paid the proper dividendaccordingly to who owned title to the shares at any particular time.This allows the IM share, once created as e-cash/IM, to act as its ownvirtual transaction agent, that is tracking the ownership of the IMshare and who is to receive the benefit of receiving the IM interestwhile the IM currency trades legal owners on the electronic cards orthrough the Internet. Thus, the e-cash/IM “token” virtual transactionagent feature allows a participant to strip the interest bearing featureof IM off of the IM token to enable Holder A to loan IM to Borrower Bthus assuring Holder A the interest payment of IM during the loanperiod. Thus, one novel feature of the present invention is the creationof a synthetic currency that may be transferred between participantsoutside the transaction agent or within the so-called virtualtransaction agent.

Another feature of the present invention is an enhanced fund accountantwho more closely monitors a participants' collateral that is used toborrow into the IM network. This allows participants, namelycorporations, to free-up capital based on underlying collateral toparticipate within the IM network. This provides companies that areasset rich but cash poor access to synthetic currency (cash), i.e., IM.This novel feature of the present invention thus allows a companyparticipant to realize the wealth of the company by collateralizingcorporate assets in exchange for IM currency.

Encrypted Stock and Asset Certificates

Another feature of the present invention is encrypted stock and assetcertificates that can be used to buy inside money within a certainmargin of the value of the asset. Although not disclosed or discussed inthe Rosen patent's encryption and authentication schemes, such schemesmay be used to create a novel electronic stock certificate. Such anelectronic stock certificate is like a bearer instrument in that theindividual that lawfully holds the certificate holds a “document” thatgives title to the stock. The present invention, through the virtualtransaction agent, may allow an individual to “buy” inside money up to apredetermined margin using the electronic stock certificate ascollateral. Thus, the electronic “token” that represents inside moneymay also encode information about the collateral that was used to buythe inside money on margin. It is understood that after a predeterminedamount of time inside money that was purchased on margin may requirecover. The present invention provides a means for inside money bought onmargin to “time out” and cover. The present invention also provides ameans to secure the asset that was used as collateral to buy the insidemoney. Thus, the encrypted electronic stock certificate of the presentinvention provides a tamper proof means to attach or place a lien on theasset to indicate that the asset was used as collateral to buy insidemoney. The present invention also provides a means for the collateral to“time out” or liquidate to cover the inside money purchase. One means totrack and secure the electronic stock certificates used to purchaseinside money is to require the smart card that contains the electronicstock certificate to transfer preemptive rights to the stock to thetransaction agent. The transaction agent thereby obtains the means ofliquidating the stock, through the preemptive rights, to cover theinside money margin purchase.

We claim:
 1. A synthetic currency transaction network performingtransactions with near real time finality of transaction betweenpotential borrowers and potential lenders, said synthetic currencycreated by pooling and dividing into shares a portfolio of highly liquidassets and by frequent evaluation and disbursements of dividends onthose assets so as to hold the value of the synthetic currency share atunity with the underlying currency, said synthetic currency networkcomprising: means for interfacing synthetic currency network users tosaid synthetic currency transaction network; database means for storingand maintaining records and other information used by said syntheticcurrency transaction network; transaction management means operativelyconnected to said means for interfacing and said database means formanaging network users' accounts and all network transactions; fundaccounting means operatively connected to said transaction managementmeans for managing network information regarding said syntheticcurrency; deposit bank means which acts as custodian for said portfolioof highly liquid assets which underlie said synthetic currency;investment management means operatively connected to said transactionmanagement means and said deposit bank means for managing the measure ofsynthetic currency and directing investment decisions; and loanaccountant means operatively connected to said transaction managementmeans for managing all lending and borrowing activities in saidsynthetic currency transaction network.
 2. The network of claim 1wherein said means for interfacing processes customer inquires andprovides a hardcopy record of the transaction.
 3. The network of claim 1wherein said records comprise one or more of account balances,collateralized lines of credit, transaction records, rates of returns,exchange rates, pricing information, audit trials, loanable syntheticcurrency, amounts owed, amounts loaned, and collateral valuation.
 4. Thenetwork of claim 1 wherein said means for fund accounting calculatessaid synthetic currency transaction network's rate of return, updatesexchange rates for transfers between different synthetic currencies, andgives instructions to initiate actions to hold the value of saidsynthetic currency share at unity with the underlying currency.
 5. Thenetwork of claim 1 wherein said means for transaction management isresponsive to perform changes to said network users' accounts.
 6. Thenetwork of claim 1 wherein said means for transaction management isresponsive to initiate actions to hold the value of said syntheticcurrency share at unity with the underlying currency, if instructed toby said fund accounting means, by requesting creation or liquidation ofsaid synthetic currency.
 7. The network of claim 1 wherein said meansfor transaction management is responsive to check, approve, and makingfinal all network transactions.
 8. The network of claim 1 wherein saidmeans for investment management is responsive to receive requests fromsaid transaction management means to create or liquidate syntheticcurrency.
 9. The network of claim 1 wherein said means for investmentmanagement is responsive to direct as to what particular investmentsshould be purchased or sold.
 10. The network of claim 1 wherein saidmeans for investment management is responsive to re-invest matureinvestments.
 11. The network of claim 1 wherein said means forinvestment management is responsive to processes advanced notice onlarge synthetic currency buy or sell orders.
 12. The network of claim 1wherein said loan accountant means is responsive to establish creditlines for synthetic currency users.
 13. The network of claim 1 whereinsaid loan accountant means is responsive to calculate the rate of returnfor the pool of synthetic money loanable shares.
 14. The network ofclaim 1 wherein said loan accountant means is responsive to distributethe interest acquired from the loaned synthetic money to the loan pool.15. The network of claim 1 wherein said loan accountant means isresponsive to collect all debts and fees associated with the system'slending and borrowing function.
 16. The network of claim 1 wherein saidloan accountant means arranges for credit for said synthetic currencynetwork users.
 17. A virtual synthetic currency transaction agent whereauthenticated and encrypted synthetic currency shares are encoded ontoan electronic currency medium, said agent comprising: means forinterfacing said synthetic currency transaction agent to other syntheticcurrency transaction agents; means for storing and maintaininginformation regarding past transactions and ownership of said syntheticcurrency transaction agent; means for tracking information regarding theinterest on said synthetic currency, said information including thecurrent owner of the interest and its value; means for trackingdividends regarding said synthetic currency; and means for tracking thepoints charged for the lending of said synthetic currency.
 18. A methodof performing a virtual synthetic currency transaction, said methodcomprising: transferring currency to a deposit bank; acquiring aportfolio of highly liquid assets by said deposit bank; creatingsynthetic currency by dividing said assets into synthetic currencyshares; executing transactions necessary to maintain said portfoliosufficiently liquid while maintaining a high rate of return;authenticating and encrypting said synthetic currency shares; encodingsaid authenticated and encrypted synthetic currency shares onto anelectronic currency medium; transferring said synthetic currency bytransferring said synthetic currency shares from one said electroniccurrency medium to one or more other said electronic currency medium;and updating each said electronic currency medium to reflect saidtransfer.
 19. The method of claim 18 wherein said electronic currencymedium is e-cash.
 20. The method of claim 18 wherein said electroniccurrency medium is electronic smart cards.
 21. A method of performingsynthetic currency transactions with near real-time finality ofsettlement between users, said method comprising: transferring currencyfrom a network wire to a user's account; acquiring a portfolio of highlyliquid assets, said assets used to create a pool of assets; creatingsynthetic currency; processing a user's request for one or more saidsynthetic currency transactions; updating said user's account to reflectthe net result of said processing of said user's request; calculatingand executing transactions necessary to maintain said synthetic currencyshare cost at unity; and calculating and executing transactionsnecessary to maintain said portfolio sufficiently liquid whilemaintaining a high rate of return.
 22. The method of claim 21 furthercomprising the step of tracking who holds synthetic currency, whoreceives said interest due on said synthetic currency, and which saidusers owe points to other said users.
 23. The method of claim 22 furthercomprising the step of paying said interest due.
 24. The method of claim21 further comprising the step of anticipating large synthetic currencytransactions so as to create or liquidate synthetic currencyautomatically in the most efficient manner.
 25. The method of claim 21wherein said step of creating synthetic currency comprises dividing saidpool of assets into synthetic currency shares.
 26. The method of claim21 wherein said step of processing a user's request further comprisesmatching synthetic currency lenders with qualified synthetic currencyborrowers.
 27. The method of claim 26 wherein the ratings of saidlenders and said borrowers are disclosed.
 28. The method of claim 26wherein said lender retains the interest bearing features of saidsynthetic currency.
 29. The method of claim 26 wherein said lendernegotiates an interest payment from said borrower.
 30. The method ofclaim 21 wherein said step of creating synthetic currency comprisesfrequently evaluating and disbursing dividends on said pool of assets tohold the value of said synthetic currency shares at unity with theunderlying said currency.
 31. The method of claim 21 wherein saidportfolio of highly liquid assets comprises one or more short, medium,or long range treasury instruments.
 32. The method of claim 31 whereinsaid treasury instruments are mutual funds.
 33. The method of claim 21wherein said portfolio of highly liquid assets comprises one or morepools of highly liquid assets.
 34. The method of claim 33 wherein saidusers are allowed to trade in said one or more pools of highly liquidassets shares.
 35. The method of claim 21 wherein said step ofprocessing said user's requests comprises buying into said syntheticcurrency.
 36. The method of claim 35 wherein said user's request to buyinto said synthetic currency comprises: transferring said currencyreceived from said network wire to a cash account; verifying sufficientsaid synthetic currency shares are available in said pool of assets andperforming one of the following: transferring said currency into saidsynthetic currency shares if sufficient said synthetic currency sharesare available, or increasing the size of the pool by acquiring newassets if insufficient said synthetic currency shares are available;calculating the new size and dividend on said pool of assets and the newrate of return; and transferring said synthetic currency shares to saiduser's synthetic currency account.
 37. The method of claim 21 whereinsaid step of processing said user's requests comprises divesting fromsaid synthetic currency.
 38. The method of claim 37 wherein said user'srequest to divest from said synthetic currency comprises: receivingpayment request instruction from said user; verifying saidusers'synthetic currency account has sufficient said synthetic currencyshares and performing one of the following: holding said payment requestin pending queue until receipt of sufficient said shares, ifinsufficient said shares are available, or clearing transaction forfinality and debiting said users' synthetic currency accountaccordingly, if sufficient said shares are available; returning saidshares to said pool if said pool is below its high margin; liquidatingappropriate of said assets from said pool if said pool is above its saidhigh margin; confirming sale of said assets and crediting cash accountaccordingly; calculating new size and dividend on said pool; andtransferring, electronically, cash to user's designated externalaccount.
 39. The method of claim 21 wherein said step of processing saiduser's requests comprises transferring said synthetic currency.
 40. Themethod of claim 21 wherein said step of processing said user's requestscomprises exchanging said synthetic currency.
 41. The method of claim 21wherein said step of processing said user's requests comprises checkingand approving said synthetic currency transaction.
 42. The method ofclaim 41 wherein said checking comprises checking one or more of: thesynthetic currency shares in the pool; lines of credit; whether share isloanable; and whether transaction is contingent on another transaction.43. The method of claim 21 wherein said first step of calculating andexecuting comprises maintaining a margin pool of shares necessary toabsorb the internal dynamics of performing said synthetic currencytransactions to save said user money by converting said transactionsfrom a gross settlement system to a periodic net settlement system. 44.The method of claim 43 wherein said pool is collateralized by usersdesignating a certain percentage of shares to cover outstandingtransactions.
 45. The method of claim 21 wherein said users comprisepotential borrowers and potential lenders of synthetic currency.
 46. Themethod of claim 21 wherein said method continuously pays the holder ofsaid synthetic currency a competitive interest rate.
 47. The method ofclaim 21 wherein said method reduces transaction delays by bypassingmultiple banking systems.
 48. The method of claim 21 wherein said methodcontinuously pays said interest throughout the entire transaction.